Amazon revenue rises 22% amid record holiday spending

Amazon.com Inc., the world’s largest Internet retailer, reported fourth-quarter sales that rose 22% as more shoppers turned to its broad product selection and speedy shipping for holiday gifts.

Sales climbed to $21.3 billion, the Seattle-based company said today in a statement. Analysts on average had projected $22.2 billion, according to data compiled by Bloomberg. Shares rose as much as 8.3% in extended trading.

Chief Executive Officer Jeff Bezos is pumping money into new warehouses, seeking to give consumers a reason to choose Amazon over going to the mall by offering two-day delivery. The company announced 19 shipment hubs in the third quarter alone, a move that meant a 35% increase in fulfillment costs from a year earlier. While the investment weighs on margins, it helped Amazon grab a bigger share of the record $42.3 billion spent online over the holidays, according to researcher ComScore Inc.

Amazon is the only company “that is able to leverage a global fulfillment network to drive disruption of traditional offline retail sales,” Scott Devitt, an analyst at Morgan Stanley, wrote in a note to clients. “The market is underestimating the long-term international sales opportunity and the cost leverage that will occur as fulfillment investments drive lower unit-variable shipping costs.”

Amazon shares climbed as high as $282 after the report. They had fallen 5.7% to $260.35 at the close in New York. The stock jumped 45% in 2012.

Operating Income

Net income in the fourth quarter fell to $97 million, or 21 cents a share, from $177 million, or 38 cents, a year earlier, the company said.

First-quarter operating income will range from a loss of $285 million to profit of $65 million, Amazon said, while analysts on average had projected operating profit of $261.4 million. Sales will rise to $15 billion to $16.6 billion, compared with an average analyst estimate of $16.8 billion.

Amazon’s spending on fulfillment may help it gain share in a worldwide e-commerce market that Devitt estimated will reach $1 trillion by 2016, up from $512 billion last year. By then, Amazon’s share will be 23.5 percent, pushing the company’s total sales to $166 billion, he projected in a Jan. 6 note.